Image source: Getty Images
A long time ago, an event was held at the COP26 meeting in Glasgow.
There, nations gathered to discuss climate change, and passed important resolutions that spelled the death knell for fossil fuels and the technologies used for them. Activists chanted, waved banners, and cheered them on.
In parallel, fund managers and pension funds have staked out their own ESG credentials, proudly selling old-fashioned polluting businesses that may have been around for decades and buying stock logos of green bright futures.
It was a remarkable demonstration of how the attitude towards ESG issues (short for ‘Environmental, Social and Governance’) has changed the investment landscape in just a few years.
Green is good. But heat is better.
Perennial football stars Shell (LSE: SHEL) and Bp (LSE: BP) For example, they were seen as a kind of living dead: their ledgers could be loaded with oil and gas fields, but in reality these were assets in name only – the oil and gas would never emerge. ‘Sliced assets’ was the term used.
Turn the clock back to today, and the picture is a little different. And I don’t need to tell you why.
Oil and gas fields that were sold by companies have been seized. Shell has reversed its decision not to develop the Jackdaw gas field in the North Sea. He may yet change his mind about the Cambo field outside Shetland.
The same is true throughout Europe. Germany – which plans to phase out electricity from coal by 2030 – is now bringing mothballed coal-fired power stations back on stream.
Those COP26 commitments? Keeping homes warm – and factories running – reduces green plants, it seems.
Unpopular shares are returned
Shares in Shell were trading at around 1,600p ahead of the COP26 summit. BP, 340 p. Today, Shell shares are trading at 2,350p, and BP shares at 450p.
Even unloved for centuries Central (owner of British Gas) is on the move, its shares are up 50% for the year.
‘Tucked Assets’? i don’t think so. Nor do I think we’ll see the return of that phrase anytime soon. ESG activists hate it, but governments know energy security is critical. There will be more green energy projects – but the lesson has been learned: fossil fuels are a valuable backstop.
And, obviously, the share of green energy providers has also benefited – Greencoat UK wind For example, it has increased by about 25% since COP26.
But – crucially – they didn’t go wrong because of ESG concerns in the first place.
All those fund managers and pension trustees must be feeling pretty sheepish.
Play it again, Sam
We’ve seen this movie before, of course — and with some of the same stakes. In the year In 2016, resource stocks generally went under the hammer: mining stocks, oil and gas stocks, and engineering and support companies that provide such businesses.
the reason? Reducing Chinese demand, which could be permanent. Prices have crashed.
But – as I wrote earlier – I thought the whole sector was oversold soon and I loaded.
i bought BHP at P596, Shell at P1,295; IMI In 773 p., and Wire For example, in 777 p.
Current prices? At the time of writing, it’s 2,230p, 2,345p, 1089p and 1,4421p — and that’s in today’s worst market. Last year’s IMI peak was 1,878p, for example.
The moral: When a sector goes wrong, deals abound – those are enough to spot them.